August 18, 2011

Refinance soon to avoid stricter rule

By Marcie Geffner - Bankrate.com

Homeowners who need to refinance an existing mortgage, but don't have substantial equity, might want to act soon to avoid a new rule that could make refinancing more expensive. However, the rule governing "qualified residential mortgages" is still in flux and won't be in effect until at least a year from now.

At issue is the so-called credit risk retention rule, which is part of the federal Dodd-Frank Act. The rule "requires lenders that securitize mortgages to retain 5 percent of the credit risk, unless the mortgage is a qualified residential mortgage or otherwise exempt," according to the National Association of Realtors.

Six federal agencies have proposed a joint definition of the qualified residential mortgages, or "QRMs." These loans are expected to be less costly for borrowers because the loans won't be subject to the risk retention requirement.

Read on: Refinance soon to avoid stricter rule

Why Home Loans Are Hard To Get

By Marcie Geffner - Wisconsin Real Estate

Wisconsinites’ median credit scores are among the highest in the United States. Yet that tendency toward good credit hasn’t shielded Wisconsin home buyers from the current climate in which mortgage lenders have tightened their guidelines, raising the bar for buyers who need financing.

The biggest hurdle is what Stephen LaDue, a senior loan officer with Prime Lending, a PlainsCapital company, in Brookfield, describes as “ever-changing minimum credit score requirements.” The challenge is twofold: lenders across the board have raised minimum scores required to obtain a loan while many borrowers have experienced a myriad of economic setbacks that LaDue says have caused “ripple effects throughout their credit.” The most common setback is unemployment, followed by such issues as a short sale, foreclosure or bankruptcy.

Some borrowers simply don’t understand the degree to which these incidents can harm their credit, adds Julie Flor, a district mortgage manager at M&I, a part of BMO Financial, in Chippewa Falls. The culture of good credit and diminished social stigma associated with financial problems might explain why some borrowers mistakenly believe they can get a new home loan within months after a foreclosure or bankruptcy.

Read on: Why Home Loans Are Hard to Get

5 Tips for First-Time Home Sellers

Buying a home doesn't teach you everything you need to know about selling one.

By Marcie Geffner - HSH.com

First-time home sellers aren't real estate newbies. After all, most sellers were buyers at one time or have been homeowners at least for a while. But just because you've bought or owned a home doesn't mean you know how to sell one. The fact is novice sellers face challenges and decisions that are unique to the sales process.

If you're ready to sell, but anxious about the unfamiliar experience, here are five tips you should consider:

1. Buyer's market or seller's market? During the housing boom, houses sold quickly and sellers had a lot of market power. But today, the opposite is more often the case. If you bought your house in the early or mid-2000s, you might be surprised to find out how much the market has changed, and disappointed to discover you don't have as much power as sellers used to command.

Read on: Five Tips for First-Time Home Sellers

Don't Sell a Smelly House

By Marcie Geffner - Bankrate

Homebuyers don't want houses that stink. Sellers must identify and remediate odors that make prospective purchasers hold their noses and run for the exits.

A buyer's market is a tough challenge for sellers, says Patti Ketcham, owner of Ketcham Realty Group in Tallahassee, Fla.

"If you're selling," she says, "your house has to look a little better, smell a little better and be priced a little better than the other houses the buyer will look at that same day."

Unfortunately, it's not always easy for sellers to identify familiar smells that might be problematic, says Neeraj Gupta, director of product research and development at ServiceMaster Clean, which performs major cleanups and post-disaster restorations of residential and commercial properties.

"There is no 'odor meter,'" Gupta says. "People get used to the odor of their house and may not notice that something is not pleasant."

Read on: Don't sell a smelly house

Should you close at the end of the month?

By Marcie Geffner - Bankrate

Conventional wisdom says home buyers should wrap up their purchase deal at the end of the month so they can pay less prepaid interest at closing. That's not a bad strategy, but like so much conventional wisdom, it's often misunderstood and not always ideal.

In fact, buyers don't save money by closing at the end of the month, says Peter Thompson, a senior loan officer at Prospect Mortgage in Naperville, Ill. Rather, a month-end close means buyers pay less prepaid interest, but skip only one subsequent monthly payment. Meanwhile, buyers who close at the start of the month pay more prepaid interest, but then skip two monthly payments. Either way, there are no interest-free days; so in effect, the difference is more about cash flow than savings.

Read on: Should you close at the end of the month?

Gift or Mortgage Fraud?

By Marcie Geffner - HSH.com

If you're ready to buy a house, but don't have enough cash to make a down payment and cover your closing costs, you might want to ask your parents or other family members to make up the difference with a monetary gift.

A genuine gift, meaning no repayment is expected or implied, can help you qualify for a mortgage. But a "gift" that is really a loan in disguise could be problematic or even considered loan fraud, a federal crime with serious consequences.

That distinction, between a genuine gift and loan fraud, is precisely why lenders require a so-called "gift letter" to document that any gift you get is in fact genuine.

Read on: Gift or Mortgage Fraud?

Bargain or Bust: Buying a House As-Is

By Marcie Geffner - Bankrate.com

Legally speaking, buying a house as-is encompasses more than the seller's reluctance to make repairs. It also releases the seller from responsibility or liability for the home's condition. The buyer gets the property with no guarantee that it's free from minor or major problems, says Joanne Fanizza, a real estate attorney in Farmingdale, N.Y.

"What you see is what you get," she says. "The question then is: What do you see?"

Houses are sold as-is for a reason. Consequently, there's all the more need for the buyer to obtain a professional property inspection, says David Tamny, owner of Professional Property Inspection in Columbus, Ohio.

Read on: Bargain or bust? Buying a house as-is

Left Short...On Patience

By Marcie Geffner - California Real Estate

Call it financial foolishness, predatory lending or hard luck. Regardless of the causes, a short sale can be a devastating and futile way to try to end a once-happy homeownership experience that's turned sour.

And that's just for the former homeowners.

For REALTORS®, short sales that don't close means a loss of time, money and better opportunities.

To gain an understanding of the challenges, California Real Estate magazine asked three homeowners to share their stories on the road to foreclosure.

Read on Left Short...on Patience

Why the housing crash is still a wreck

By Marcie Geffner • Bankrate.com

Foreclosures. Short Sales. Unemployment. Tight credit. Overbuilding. Those are but some of the reasons housing markets in many parts of the country remain stubbornly depressed, even while activity in other economic sectors has begun to rebound.

New-home building and sales of existing homes historically have been leading economic indicators, pointing the way to robust recovery after a downturn. In the current cycle, however, that hasn't happened, says Lawrence Yun, chief economist at the National Association of Realtors.

"Housing has always been the leader in terms of getting the economy back on track," Yun says, "but that is not the case this time around."

Read more: Why the housing crash remains a wreck